- B/c ratio 2.82 vs. Avg. 2.35 (Prev. 2.26)
- Indirects 67.2% vs. Avg. 31.39% (Prev. 33.07%)
- Allotted at high 13.17% Sphere: Related Content
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Thursday, June 25, 2009
$27 Billion 7 Year Note Auction Results
- Yield 3.329% vs. Exp. 3.360%
- B/c ratio 2.82 vs. Avg. 2.35 (Prev. 2.26)
- Indirects 67.2% vs. Avg. 31.39% (Prev. 33.07%)
- Allotted at high 13.17% Sphere: Related Content
- B/c ratio 2.82 vs. Avg. 2.35 (Prev. 2.26)
- Indirects 67.2% vs. Avg. 31.39% (Prev. 33.07%)
- Allotted at high 13.17% Sphere: Related Content
Louis Gerstner: Kill The Casino Wall Street Has Become
In an interesting overture to killing the current casino culture that is enveloping capital markets, none other than IBM former CEO Louis Gerstner is recommending taxing short-term (less than 1 year) capital gains at 80%. While such a proposal is sure to kill 90% of participants in the capital markets casino which lately trade only on an intraday basis and nobody cares about fundamentals that may justify a long-term buy or hold (simply because anything long-term in this economy will ultimately result in a 0 valuation). From Bloomberg:
And while Gerstner's proposal is truly revolutionary, there is no way in hell that micro trade focused Goldman Sachs, which is back to its hedge funds swing and momentum trading days, would ever allow this to become actual policy. With Larry Summers happy to have Ben keep his chair warm for at most a few more months, one can be certain that Wall Street's power interests will soon be maintained in perpetuity or until the S&P hits 0, whichever comes first (in the next 2 years). Sphere: Related Content
“If you buy something -- a stock or a bond -- in the morning, and you sell in the afternoon, the tax probably ought to be 80 percent,” said Gerstner, also a former chairman of Carlyle Group, the world’s second-largest private equity firm.Some other revolutionary ideas by Gerstner:
“If you hold it for six months, maybe it ought to be 60 percent,” Gerstner told Bloomberg Television.
“We do have a greed or an inefficiency that comes out of excessive focus on the short term,” said Gerstner, who bemoaned an investment climate driven by quarterly earnings and a 24-hour news cycle. He was an executive at American Express Co. and RJR Nabisco Inc. before joining IBM.
Gerstner, who approves of generous compensation for executives who add shareholder value, called for an end to golden parachutes for failed managers. “We have to see an elimination of pay for people who get fired and then wind up with these huge payments,” he said.A good example of the short-term trading culture is today's market action, where the S&P has gone from down 3 points to up 17 points (an intraday 20 point swing on nothing!) on a plethora of bad economic news, simply as a result of manipulated futures purchasing by visible and invisible hands, to preempt potential panic selling as a result of the impending termination of Ben Bernanke from his current post, compliments of several non-conformist Congressmen. Presumably Goldman is cheering Summers impending appointment to the former's post by buying every share it can find (as well as TSYs, Oil, Gold, and the dollar: we are back to global market beta = 1.000).
Gerstner acknowledged that Wall Street executives he knows wouldn’t like his plan for higher taxes on investment gains.
“They wouldn’t like it at all,” Gerstner said. “Wall Street is driven by transactions. That’s what they live by. They don’t live by long-term investment decisions.”
And while Gerstner's proposal is truly revolutionary, there is no way in hell that micro trade focused Goldman Sachs, which is back to its hedge funds swing and momentum trading days, would ever allow this to become actual policy. With Larry Summers happy to have Ben keep his chair warm for at most a few more months, one can be certain that Wall Street's power interests will soon be maintained in perpetuity or until the S&P hits 0, whichever comes first (in the next 2 years). Sphere: Related Content
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Bank Of England Gilt Buyback Issues Escalating
The Bank Of England has announced that it is excluding the 5% 2014 and 8% 2021 gilts from buybacks until notice. As this is likely indicative of the major weakness in the gilt curve, the US better sell all the 5-12 year comparable Treasuries it can asap.
Sphere: Related Content
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Baltic Dry Index Drop Accelerates
One word: Reundecoupling (was also very appropriate last year when the China thesis plummeted, but investors have 24 hour long-term memory).
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Volkswagen Shares Set To Plunge?
Developing story: German Government adviser says Porsche should sell some VW (VOW GY) shares to raise cash.
Disclosure: no holdings of volkswagen or porsche securities. Sphere: Related Content
Disclosure: no holdings of volkswagen or porsche securities. Sphere: Related Content
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Bernanke Prepared Testimony
As Ben is about to be crucified before the House Committee on Oversight and Government Reform, below is his full prepared testimony. Also, if readers want to watch the hearing live without CNBC's commercial interruptions for Sham-Wow or Mark Haines doing long division on air to calculate the difference between Dow futures and fair market value, they can do so here.
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New York Times Sale Rumors Quashed... For Now
In an interview with MarketWatch's Jon Friedman, Janet Robinson, CEO of embattled former media titan and now merely distressed media company scrambling to plug debt covenant holes, New York Times, has announced that she has had it with other members of the evil, speculative media world.
Robinson objects to criticisms surrounding the company's handling of the much-publicized labor negotiations with the Times' Boston Globe unit. She is weary of the endless speculation that the Times has already decided to launch a pay model for some or all of its Internet properties, noting that the company expects to make an announcement this fall.
And no, no, no -- the Times is not about to be acquired by Mexican billionaire and prominent Times stockholder Carlos Slim, Hollywood mogul David Geffen or anybody else, she says. Robinson is particularly tired of hearing the rumors that the company will be sold.
Robinson's unhappiness with the media echoed throughout my nearly two-hour lunch with her at the Times headquarters on Tuesday. The media, Robinson told me, "have to look beyond the stock price."
Janet - we do, and all we see is a mountain of piling debt with scary covenants attached, which if not addressed will result in an even worse stock price ($0.00 is worse than any 52 week low).
Robinson most resents the rumors that the Times is on the block. The Sulzbergers, who run the company, "are committed to the ownership structure it has now," she said.Resents sale rumors? Nobody in their right mind would go after the NYT equity at this moment - in fact, the NYT would be ecstatic to find someone who would be willing to pay even half of last year's high for this melting ice cube. Carlos Slim (and others) is smart - he is buying fulcrum debt and fully expects to get equitized (read debt-for-equity conversion), when the company files for bankruptcy. And file it will, unless it manages to dramatically reduce its existing debt load. But for that to happen, existing debtholders will extract their pounds of flesh. Either way, the Sulzbergers' moment of fame (and max wealth) is over: at this point they can fool themselves with promises of a future that will never occur (they are forgiven for this - after all this is the administration's MO, and the sterling example our President sets for corporate America), or they can proactively address the mountain of debt, and part with a major chunk of equity in exchange for keeping the company alive. Of course, if existing trends in media ad spend, and commodity price inflation (ahem, paper) persists, nothing the NYT, Janet or the Sulzbergers do will have any relevance on the future at all. Sphere: Related Content"The family has made it very clear that they are the owners of the New York Times Company and are very supportive" of the stewardship of Robinson and Arthur Sulzberger Jr., the chairman of the parent company and publisher of the New York Times.
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Frontrunning: June 25
- Second derivative promptly trounced: Initial jobless claims pick up again to 627k (Reuters and Bloomberg)
- Jonathan Weil: Capital One's $549 million man buys back freedom (Bloomberg)
- ECB favors underground press over helicopter drop (Reuters)
- Revised GDP allegedly supposed to show much stronger economy (BBC)
- Treasury yields drop as green shoots exposed to be pure propaganda (Bloomberg)
- Deep in bedrock, clean energy and quake fears (NYT, h/t Bob)
- The truth about inflation and jobs (Delta Global)
- The Bandwidth boom (Entropy Economics)
- Cap And Trade = Economy Killer (NY Post)
- Roubini and Parisi-Capone: Regulatory reform: a primer (Forbes)
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Daily Highlights: 6.25.09
- Bernanke will face hostile questioning on BofA deal.
- Fed leaves bond-purchase program unchanged, says pace of contraction slows.
- Fed: Key interest rate will remain near zero "for an extended period."
- Irish banks face $49 billion in losses.
- New-home sales unexpectedly fell 0.6% in May from the prior month.
- Bed Bath & Beyond's qtr net up 14% at $87.2M; revs up 2.8% at $1.69B.
- China Construction plans to set up a venture with Banco Santander.
- China Petrochemical completed purchase of Addax for $7.2 billion.
- CKE Restaurants' Q1 EPS at $0.29 (cons $0.25); revs fall 4.1% to $446.8M.
- Conagra's May net income declines from $201M last year to $175M this year.
- JPMorgan imposes 5% fee on card balance transfers, citing US regulations.
- GM to close vehicle assembly and metal-stamping plants in Shreveport, La..
- Herman Miller's Q4 net falls 82% to $7.2M; revs fall 38% to $319.9M.
- Monsanto to restructure herbicides ops as net falls 14% to $694M. Revs down.
- Marathon Oil to sell its interest in Corrib devlpt in Ireland for ~$235-400M.
- Nike's Q4 net dropped 30% to $341.4M on a $195M in restructuring charges. Revs down 7.4% to $4.71B.
- Oracle's Q4 net beats expectations, falls 7%, revs down 5% to $6.9B.
- Paychex Q4 net down 16% on lower sales; FY view below estimates.
- PepsiCo. acquires a stake in Calbee Foods, Japan’s biggest producer of potato chips and shrimp crackers.
- Rite Aid posts Q1 loss of $0.11/sh; revs fell 1.2% to $6.53B. Sees FY10 EPS of ($0.59)-(0.33) vs. cons ($0.42).
- Seagate boosts Q4 rev guidance, sees Q1 sales above street view.
- Sinopec to acquire oil explorer Addax Petroleum Corp. for $7.2B.
- Toyota worldwide output dropped 38.8% -- the 10th straight monthly decline.
Earnings Calendar: ACN, CAG, CBK, FINL, FLOW, JTX, LEN, MKC, MU, PALM, RBN, TIBX.
Companies to watch: Accenture, Christopher & Banks, ConAgra Foods, Flow Intl, Jackson Hewitt Tax Srvcs, Lennar, McCormick & Co, Palm, TIBCO Software.
Recent Egan-Jones Rating Actions:
DARDEN RESTAURANTS INC (DRI)
WASTE MANAGEMENT INC (WMI)
CONSTELLATION ENERGY GROUP INC (CEG)
CONTINENTAL AIRLINES INC (CAL)
AMR CORP (AMR)
AMERICAN TOWER CORP (AMT)
KROGER CO/THE (KR)
AGRIUM INC (AGU)
FORD MOTOR CO (F)
OFFICE DEPOT INC (ODP)
BRITISH AIRWAYS PLC (BAY LN)
ACTUANT CORP (ATU)
BOSTON SCIENTIFIC CORP (BSX)
Data compliments of: Egan-Jones Ratings And Analytics Sphere: Related Content
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Overalottment: June 24
- Wall Street begins campaign to thwart populist overreaction (Bloomberg) [Zero Hedge soon to begin campaign to thwart this campaign]
- $27 billion of 7 Year USTs on deck (Bloomberg)
- Deflating our way to Posterity (Dr. Housing Bubble)
- Harry Schultz: Gold confiscatory bank holiday coming up? (MarketWatch, h/t Pere Ubu)
- Treasury is overstating indirect bids at auctions (Reuters)
- As Zero Hedge predicted many months ago, Shinsei and Aozora are merging (Bloomberg)
- FOMC statement (Wall St. Cheat Sheet)
- GOP to paint Bernanke as ally of big government (NYT)
- Simon Property Group forces cancellation of Tea Party planned at one of its malls (WSB)
- Cash4Gold offers blogger $3,000 to remove negative post (Consumerist, h/t Shanky)
- Barclays must give more data on Lehman (WSJ)
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Wednesday, June 24, 2009
Alan Grayson Letter To Neil Barofsky Requesting Audit of Citi
First, Darrel Issa taking on Bernanke in what may prove a fateful and timely opposition against the Federal Reserve, now Alan Grayson going for Bernanke, Geithner, and Vikram's jugular. Just when it seemed that the D.C.-Wall Street crony alliance would last forever (don't worry Barney, we still love you), opposition voices finally emerge and take on the biggest culprits head on.
Among the questions that Grayson is seeking the SIGTARP's assistance on are:
1. How was the deal negotiated by Citigroup, the Federal Reserve, and the Treasury? How does this loss-sharing arrangement benefit taxpayers?
2. What are current mark-to-market losses to the Federal Reserve in this loss-sharing arrangement?
3. What is the current cash flow from these assets? Are these asset performing?
4. Who should be held accountable for the reckless acquisition of a third of a trillion dollras in assets that ended up requiring a government guarantee? [emphasis mine]
5. Which vendors are pricing these assets, and are there conflicts of interest present in these vending arrangements?
6. Is the Federal Reserve guaranteeing assets generated from lender-induced mortgage fraud and predatory lending practices?
Tomorrow's House Committee hearings will be fun to quite fun.
Sphere: Related Content
Among the questions that Grayson is seeking the SIGTARP's assistance on are:
1. How was the deal negotiated by Citigroup, the Federal Reserve, and the Treasury? How does this loss-sharing arrangement benefit taxpayers?
2. What are current mark-to-market losses to the Federal Reserve in this loss-sharing arrangement?
3. What is the current cash flow from these assets? Are these asset performing?
4. Who should be held accountable for the reckless acquisition of a third of a trillion dollras in assets that ended up requiring a government guarantee? [emphasis mine]
5. Which vendors are pricing these assets, and are there conflicts of interest present in these vending arrangements?
6. Is the Federal Reserve guaranteeing assets generated from lender-induced mortgage fraud and predatory lending practices?
Tomorrow's House Committee hearings will be fun to quite fun.
Sphere: Related Content
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The Fed's Emails
The following may or may not be all the emails that will be referenced at the hearing tomorrow. Oddly (or not) the $78 billion portfolio of problem positions has been redacted.
Going through these now... At first blush, sentences like "Ken Lewis' claim that they were surprised by the rapid growth of the losses seems somewhat suspect. At a minimum it calls into question the adequacy of the due diligence process BAC has been doing in preparation for the takeover. [As an aside, BAC management told us they could not provide electronic versions of ML files, and one wonders how that is possible since they have been doing the due diligence for months and having e-files would have made that much simpler and more effective for them. May have helped limit their current surprise.]" get the saliva going.
Also this tidbit could cause some headaches:
And at least someone is honest:
And this could very well be the piece de resistance.
Sphere: Related Content
Going through these now... At first blush, sentences like "Ken Lewis' claim that they were surprised by the rapid growth of the losses seems somewhat suspect. At a minimum it calls into question the adequacy of the due diligence process BAC has been doing in preparation for the takeover. [As an aside, BAC management told us they could not provide electronic versions of ML files, and one wonders how that is possible since they have been doing the due diligence for months and having e-files would have made that much simpler and more effective for them. May have helped limit their current surprise.]" get the saliva going.
Also this tidbit could cause some headaches:
And at least someone is honest:
And this could very well be the piece de resistance.
Sphere: Related Content
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Daily Credit Summary: June 24 - FOMC Kegels
Spreads were tighter in the US as all the indices improved (though 2-3bps wider than the pre-FOMC tights in IG). Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY outperformed but narrowed the skew.
Only 9.6% of names in IG moved more than their historical vol would imply as higher vol names underperformed lower vol names by -1.23% to -1.87%. IG's vol is around 4.38% per 1 day period, which leaves 98 names higher vol and 27 lower vol than the index.
The names having the largest impact on IG are CIT Group Inc (-35.86bps) pushing IG 0.18bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.18bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 0.81bps tighter, and American International Group, Inc. contributing 0.68bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Toll Brothers, Inc. (-8.75bps) pushing the index 0.09bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.23bps to ExHVOL.
The price of investment grade credit rose 0.2% to around 98.29% of par, while the price of high yield credits rose 1.37% to around 83% of par. ABX market prices are higher (improving) by 0.1% of par or in absolute terms, 0.78%. Broadly speaking, CMBX market prices are higher (improving) by 0.62% of par or in absolute terms, 0.2%. Volatility (VIX) is down 1.53pts to 29.05%, with 10Y TSY selling off (yield rising) 7.2bps to 3.7% and the 2s10s curve flattened by 3.6bps, as the cost of protection on US Treasuries fell 7.36bps to 39.5bps. 2Y swap spreads tightened 6.3bps to 39.95bps, as the TED Spread widened by 0.7bps to 0.42% and Libor-OIS improved 0.1bps to 36.8bps.
The Dollar strengthened with DXY rising 0.87% to 80.539, Oil falling $0.64 to $68.6 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 1.52% today (a 0.05% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.57 to $931.4 as the S&P rallies (897.4 0.81%) outperforming IG credits (140.75bps 0.2%) while IG, which opened tighter at 143bps, underperforms HY credits. IG11 and XOver11 are -4bps and -28bps respectively while ITRX11 is -7.12bps to 121.13bps.
The majority of credit curves flattened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).
Dispersion fell -0.7bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.
Only 35% of IG credits are shifting by more than 3bps and 50% of the CDX universe are also shifting significantly (less than the 5 day average of 52%). The number of names wider than the index stayed at 46 as the day's range rose to 6bps (one-week average 5.98bps), between low bid at 138 and high offer at 144 and higher beta credits (-1.13%) underperformed lower beta credits (-1.48%).
In IG, wideners were outpaced by tighteners by around 3-to-1, with only 30 credits notably wider. By sector, CONS saw 30% names wider, ENRGs 19% names wider, FINLs 33% names wider, INDUs 14% names wider, and TMTs 22% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 121.73bps and the latter at 120.6bps.
Cross Market, we are seeing the HY-XOver spread compressing to 266.97bps from 288.65bps, but remains below the short-term average of 297.86bps, with the HY/XOver ratio falling to 1.36x, below its 5-day mean of 1.4x. The IG-Main spread decompressed to 19.62bps from 17.25bps, and remains above the short-term average of 19.37bps, with the IG/Main ratio rising to 1.16x, above its 5-day mean of 1.16x.
In the US, non-financials outperformed financials as IG ExFINLs are tighter by 1.9bps to 120.6bps, with 69 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 5.32bps to 169.18bps, with Finance names (worst) tighter by 8.52bps to 737.52bps, Brokers (best) tighter by 4.5bps to 198.2bps, and Banks tighter by 4.07bps to 231.83bps. Monolines are trading wider on average by 175.19bps (5.73%) to 3001.47bps.
In IG, FINLs underperformed non-FINLs (0.54% tighter to 1.58% tighter respectively), with the former (IG FINLs) tighter by 1.9bps to 352.3bps, with 11 of the 21 names tighter. The IG CDS market (as per CDX) is 38.8bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (101.99bps), with the bond ETFs outperforming the IG CDS market by around 0.61bps.
In Europe, ITRX Main ex-FINLs (outperforming FINLs) rallied 7.27bps to 121.73bps (with ITRX FINLs -trading sideways- better by 6.5 to 118.75bps) and is currently trading tight to its week's range at 15.95%, between 129 to 120.35bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading tight to its week's range at 11.51%, between 87.99 to 81.86bps. ExHVOL underperformed LoVOL as the differential decompressed to 0.08bps from -1.86bps, but remains below the short-term average of 0.44bps. The Main exFINLS to IG ExHVOL differential compressed to 39.09bps from 42.87bps, and remains below the short-term average of 39.62bps.
Commentary compliments of www.creditresearch.com
Index/Intrinsics Changes
CDR LQD 50 NAIG091 -2.11bps to 176.72 (9 wider - 31 tighter <> 23 steeper - 24 flatter).
CDX12 IG -5bps to 140.5 ($0.21 to $98.3) (FV -2.06bps to 157.22) (28 wider - 79 tighter <> 59 steeper - 65 flatter) - No Trend.
CDX12 HVOL -11.5bps to 322 (FV -4.98bps to 399.97) (7 wider - 20 tighter <> 19 steeper - 11 flatter) - No Trend.
CDX12 ExHVOL -2.95bps to 83.18 (FV -1.21bps to 88.35) (21 wider - 74 tighter <> 55 steeper - 40 flatter).
CDX11 XO -8bps to 374.5 (FV -7.21bps to 453.29) (8 wider - 23 tighter <> 19 steeper - 14 flatter) - Trend Wider.
CDX12 HY (30% recovery) Px $+1.31 to $82.94 / -47.6bps to 1014.6 (FV -10.67bps to 919.83) (19 wider - 70 tighter <> 55 steeper - 37 flatter) - Trend Tighter.
LCDX12 (65% recovery) Px $+1.45 to $82.65 / -79.35bps to 852.35 - Trend Wider.
MCDX12 +2bps to 215bps. - Trend Wider.
CDR Counterparty Risk Index fell 5.12bps (-2.93%) to 169.38bps (2 wider - 12 tighter).
CDR Government Risk Index fell 4.71bps (-6.91%) to 63.47bps.
DXY strengthened 0.87% to 80.54.
Oil fell $0.64 to $68.6.
Gold rose $5.57 to $931.4.
VIX fell 1.53pts to 29.05%.
10Y US Treasury yields rose 7.2bps to 3.7%.
S&P500 Futures gained 0.81% to 897.4. Sphere: Related Content
Only 9.6% of names in IG moved more than their historical vol would imply as higher vol names underperformed lower vol names by -1.23% to -1.87%. IG's vol is around 4.38% per 1 day period, which leaves 98 names higher vol and 27 lower vol than the index.
The names having the largest impact on IG are CIT Group Inc (-35.86bps) pushing IG 0.18bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.18bps to IG. HVOL is more sensitive with CIT Group Inc pushing it 0.81bps tighter, and American International Group, Inc. contributing 0.68bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Toll Brothers, Inc. (-8.75bps) pushing the index 0.09bps tighter, and Constellation Energy Group Inc. (+22.5bps) adding 0.23bps to ExHVOL.
The price of investment grade credit rose 0.2% to around 98.29% of par, while the price of high yield credits rose 1.37% to around 83% of par. ABX market prices are higher (improving) by 0.1% of par or in absolute terms, 0.78%. Broadly speaking, CMBX market prices are higher (improving) by 0.62% of par or in absolute terms, 0.2%. Volatility (VIX) is down 1.53pts to 29.05%, with 10Y TSY selling off (yield rising) 7.2bps to 3.7% and the 2s10s curve flattened by 3.6bps, as the cost of protection on US Treasuries fell 7.36bps to 39.5bps. 2Y swap spreads tightened 6.3bps to 39.95bps, as the TED Spread widened by 0.7bps to 0.42% and Libor-OIS improved 0.1bps to 36.8bps.
The Dollar strengthened with DXY rising 0.87% to 80.539, Oil falling $0.64 to $68.6 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 1.52% today (a 0.05% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $5.57 to $931.4 as the S&P rallies (897.4 0.81%) outperforming IG credits (140.75bps 0.2%) while IG, which opened tighter at 143bps, underperforms HY credits. IG11 and XOver11 are -4bps and -28bps respectively while ITRX11 is -7.12bps to 121.13bps.
The majority of credit curves flattened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).
Dispersion fell -0.7bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.
Only 35% of IG credits are shifting by more than 3bps and 50% of the CDX universe are also shifting significantly (less than the 5 day average of 52%). The number of names wider than the index stayed at 46 as the day's range rose to 6bps (one-week average 5.98bps), between low bid at 138 and high offer at 144 and higher beta credits (-1.13%) underperformed lower beta credits (-1.48%).
In IG, wideners were outpaced by tighteners by around 3-to-1, with only 30 credits notably wider. By sector, CONS saw 30% names wider, ENRGs 19% names wider, FINLs 33% names wider, INDUs 14% names wider, and TMTs 22% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 121.73bps and the latter at 120.6bps.
Cross Market, we are seeing the HY-XOver spread compressing to 266.97bps from 288.65bps, but remains below the short-term average of 297.86bps, with the HY/XOver ratio falling to 1.36x, below its 5-day mean of 1.4x. The IG-Main spread decompressed to 19.62bps from 17.25bps, and remains above the short-term average of 19.37bps, with the IG/Main ratio rising to 1.16x, above its 5-day mean of 1.16x.
In the US, non-financials outperformed financials as IG ExFINLs are tighter by 1.9bps to 120.6bps, with 69 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 5.32bps to 169.18bps, with Finance names (worst) tighter by 8.52bps to 737.52bps, Brokers (best) tighter by 4.5bps to 198.2bps, and Banks tighter by 4.07bps to 231.83bps. Monolines are trading wider on average by 175.19bps (5.73%) to 3001.47bps.
In IG, FINLs underperformed non-FINLs (0.54% tighter to 1.58% tighter respectively), with the former (IG FINLs) tighter by 1.9bps to 352.3bps, with 11 of the 21 names tighter. The IG CDS market (as per CDX) is 38.8bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (101.99bps), with the bond ETFs outperforming the IG CDS market by around 0.61bps.
In Europe, ITRX Main ex-FINLs (outperforming FINLs) rallied 7.27bps to 121.73bps (with ITRX FINLs -trading sideways- better by 6.5 to 118.75bps) and is currently trading tight to its week's range at 15.95%, between 129 to 120.35bps, and is trading sideways. Main LoVOL (sideways trading) is currently trading tight to its week's range at 11.51%, between 87.99 to 81.86bps. ExHVOL underperformed LoVOL as the differential decompressed to 0.08bps from -1.86bps, but remains below the short-term average of 0.44bps. The Main exFINLS to IG ExHVOL differential compressed to 39.09bps from 42.87bps, and remains below the short-term average of 39.62bps.
Commentary compliments of www.creditresearch.com
Index/Intrinsics Changes
CDR LQD 50 NAIG091 -2.11bps to 176.72 (9 wider - 31 tighter <> 23 steeper - 24 flatter).
CDX12 IG -5bps to 140.5 ($0.21 to $98.3) (FV -2.06bps to 157.22) (28 wider - 79 tighter <> 59 steeper - 65 flatter) - No Trend.
CDX12 HVOL -11.5bps to 322 (FV -4.98bps to 399.97) (7 wider - 20 tighter <> 19 steeper - 11 flatter) - No Trend.
CDX12 ExHVOL -2.95bps to 83.18 (FV -1.21bps to 88.35) (21 wider - 74 tighter <> 55 steeper - 40 flatter).
CDX11 XO -8bps to 374.5 (FV -7.21bps to 453.29) (8 wider - 23 tighter <> 19 steeper - 14 flatter) - Trend Wider.
CDX12 HY (30% recovery) Px $+1.31 to $82.94 / -47.6bps to 1014.6 (FV -10.67bps to 919.83) (19 wider - 70 tighter <> 55 steeper - 37 flatter) - Trend Tighter.
LCDX12 (65% recovery) Px $+1.45 to $82.65 / -79.35bps to 852.35 - Trend Wider.
MCDX12 +2bps to 215bps. - Trend Wider.
CDR Counterparty Risk Index fell 5.12bps (-2.93%) to 169.38bps (2 wider - 12 tighter).
CDR Government Risk Index fell 4.71bps (-6.91%) to 63.47bps.
DXY strengthened 0.87% to 80.54.
Oil fell $0.64 to $68.6.
Gold rose $5.57 to $931.4.
VIX fell 1.53pts to 29.05%.
10Y US Treasury yields rose 7.2bps to 3.7%.
S&P500 Futures gained 0.81% to 897.4. Sphere: Related Content
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BofA Smoking Gun?
Developing story from Huffington Post:
Tim Geithner, Treasury Secretary, supposedly emailed telling BofA that they couldn't back out of acquiring Merrill Lynch, according to CNBC.hat tip Vaughan Sphere: Related Content
An email by Geithner telling BofA to close the deal would be a proverbial smoking gun, since BofA honcho Ken Lewis has said he was forced into buying the bank and not publicly revealing the poor financial shape that Merill Lynch was in, in the wake of pressure from the government.
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Merrill's New REIT Teams Marks REIT Territory
The brand spanking new team (and legacy boy Craig Schmidt) that Merrill recently acquired from some other bank (I wrote about this, but frankly don't remember where these clowns came from nor do I care), just went to town all over the REIT bathroom and marked their territory effusively. ML in fact distributed a 45 page reinitiation report, which I have no intention of ever reading. The summary ratings and price targets are below.
Is it just me or does Merrill have a Sell (and $4.50 price target) on recent Goldman Conviction Buy List and Greatest REIT Pick Ever CBL & Associates? Oh wait, Goldman in fact had some nice rah-rahish words on CBL earlier today did it not.
So... same company and yet: Merrill at Sell - $4.50 PT, Goldman at Buy - $10.00 PT. That's a pretty wide differential, and indicative again that nobody has any idea what the hell is going on with REITs (except for State Street of course which is still making shorting of REITs impossible).
We venture to guess: Goldman prop desk is very heavy with big CBL exposure they need to offload: Merrill - vice versa. Sounds like some great synergies can be extracted here. Goldman prop - meet Merrill prop (or the 3 traders that are still left there).
And, indeed, GS still has about 370k shares it needs to offload (to join the 500k or so it already sold last quarter).
hat tip Ed Sphere: Related Content
Is it just me or does Merrill have a Sell (and $4.50 price target) on recent Goldman Conviction Buy List and Greatest REIT Pick Ever CBL & Associates? Oh wait, Goldman in fact had some nice rah-rahish words on CBL earlier today did it not.
So... same company and yet: Merrill at Sell - $4.50 PT, Goldman at Buy - $10.00 PT. That's a pretty wide differential, and indicative again that nobody has any idea what the hell is going on with REITs (except for State Street of course which is still making shorting of REITs impossible).
We venture to guess: Goldman prop desk is very heavy with big CBL exposure they need to offload: Merrill - vice versa. Sounds like some great synergies can be extracted here. Goldman prop - meet Merrill prop (or the 3 traders that are still left there).
And, indeed, GS still has about 370k shares it needs to offload (to join the 500k or so it already sold last quarter).
hat tip Ed Sphere: Related Content
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Direct CHF Manipulation Visualized
This is what direct, premeditated, overt manipulation looks like.
For indirect, just look around (especially the 900 level on the S&P). Sphere: Related Content
For indirect, just look around (especially the 900 level on the S&P). Sphere: Related Content
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I Would Like To Thank The Academy, Goldman Sachs, And God (Jeff Immelt)...
Was that Cramer complaining there is too much democracy in this country? My dear, you of all people should be so glad for First Amendment rights after losing hapless mom and pop retail investors, whose only sin is listening to you, countless billions and billions of dollars.
One would be tempted to link up to Jimmy's famous rant against Bernanke from two years ago. Oh what the heck... here it is. Sphere: Related Content
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Goldman Sachs: "Engineering Every Major Market Manipulation Since The Great Depression"
With a subtitle like "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again" run, don't walk, to your nearest kiosk and buy Matt Taibbi's latest piece in Rolling Stone magazine. One of the best comprehensive profiles of Government Sachs done to date. Speaking of GS, they sure must be busy today, now that Bernanke is about to be impeached and take the fall for all their machinations.
Taibbi-Goldman-Sachs - Sphere: Related Content
Taibbi-Goldman-Sachs - Sphere: Related Content
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We Have Dollar Liftoff
If anyone knows what the hell is going on with the market since the Fed release (aside from South Carolina Governor Sanford being a big fan of the Buenos Aires Hustler Club), please advise.
Sphere: Related Content
Sphere: Related Content
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Fed Statement
For immediate release
Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen. Sphere: Related ContentBookmark this post with:
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